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Under New Pollution Regulations, Milk Producers Seek Profit in Dairy Air

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From tests on metal bovines to electricity-generating manure pits, California is experiencing a radical transformation in the practices of the dairy industry. Taken together, the new initiatives amount to more than a crackdown on flatulent cows. They offer a model: how to reduce emissions while finding new sources of revenue.

Keeping Methane Under Wraps By putting a cover over manure pits, dairy farmers can capture methane and use it to generate electricity or make transportation fuel. U.S. Environmental Protection Agency

It’s no secret that the U.S. dairy industry has been struggling recently. As it faces depressed milk prices, concerns about water quality, fights over animal rights, and the rise of non-dairy alternatives — almond, soy, and rice “milk” — the dominant stature of milk in American culture is under siege.

So when the strictest rules in the country for curbing methane emissions took effect in California this year, the state’s 1,300 dairy farm families could have seen it as a devastating development. Methane is a natural product of bovine digestion, after all.

But for Paul Sousa, who grew up as part of California’s dairy industry, these rules feel a bit different. The state isn’t just telling farmers to make changes to reduce methane emissions, it’s telling them how, offering help, and showing ways that changes could be profitable.

Sousa grew up on a dairy farm and his family runs two of them in San Joaquin County. Now he works as a lobbyist at Western United Dairymen, an industry trade group. In all that time, he’s seen a lot of regulations. “We’ve gone through this with water quality and air quality,” he says, but those didn’t come with any economic incentives or financial support. Then came the measure called Senate Bill 1383.

A new law calls for reducing methane emissions by 40 percent from its 2013 levels by 2030, but comes with government outreach, economic incentives, and grant programs to help remake a more sustainable dairy industry.

This ambitious bill, signed by Gov. Jerry Brown in 2016, targets short-lived climate pollutants like methane, fluorine, and black carbon. These potent greenhouse gases don’t stay in the atmosphere like others. But they are far more effective at trapping heat: 25 times more harmful than carbon dioxide over a 100-year span. They contributed to 42 percent of California greenhouse-gas emissions in 2013. The state’s 1.7 million dairy cows are the primary culprit.

The new law calls for reducing methane emissions by 40 percent from its 2013 levels by 2030, but comes with government outreach, economic incentives, and grant programs to help remake a more sustainable dairy industry. For Sousa, “this one has a very different feeling with the economic support that’s coming with it.”

The new rules, which could take effect in 2024, have wide-ranging implications for the oil, gas, and landfill sectors all over the state. But no region will feel its impact more strongly than the Central Valley, the heartland of the state’s milk-making operations. “In California, dairy is the big source of methane emissions,” says Ryan McCarthy, Science and Technology Policy Adviser at the California Air Resources Board (CARB), the state agency tasked with finding a way to meet the 40-percent target reduction. “Dairy manure … seems like the more readily addressable source emissions rather than the cows themselves,” he said. With a view to the California Air Resources Board gaining regulatory authority over the dairy industry in 2024, the agency is working proactively with dairy operators to prepare for needed changes.

Beyond Carbon Dioxide: A Look at California’s Greenhouse Gases

Source: California Air Resources BoardGeoff McGhee

Can “Digesters” Turn a Pollutant Into a Profit Center?

From tests on metal bovines to electricity-generating manure pits, California is experiencing a radical transformation in the practices of the dairy industry. Taken together, the new initiatives amount to more than a crackdown on flatulent cows. They offer a model: how to reduce emissions while finding new sources of revenue. Aided by government grants and technology innovations, farmers are beginning to upend dairy management orthodoxy.

The traditional method of treating manure is to flush it into fields or large, open-air lagoons. There, microbial organisms break down the waste through anaerobic digestion, spewing methane into the atmosphere. Although 60 percent of California’s dairy cows are still managed this way, all signs point to an emerging approach: When open-air lagoons are covered and sealed, dairy farmers can capture methane and use it to generate electricity or make transportation fuel. These systems, known as anaerobic dairy digesters, offer both environmental and economic benefits.

According to McCarthy, the California Air Resources Board believes digesters will deliver air quality, climate, and economic benefits. “If we can prove that model, we’ll get more projects faster.” He added, “it’s a win for the climate, for the air, for the farmer, and, when it does come time to regulate, it’ll be business as usual.” The dairy industry’s representative Paul Sousa says he also sees collateral advantages of eschewing methane-spewing manure lagoons: digesters offer water-quality benefits, and can generate cow bedding or fertilizer as additional byproducts.

Expensive Flops Feed Suspicion Among Dairy Farmers

But before environmentalists, energy companies, and the government can leverage these benefits to create a more sustainable industry, they must rebuild trust with the dairy farming community. “When we started this, there were a handful of dairy digesters, maybe ten or 15, and a lot of stories of ‘well we’ve tried this before. It didn’t work then, why will it work now’?” admits McCarthy. “And the answer, we said, is that we weren’t really committed to making it work then and we are now. And there’s all these programs in place that can make it work and we want to work with you to figure it out.” He believes the message is getting through. “It’s a market that’s growing quickly.”

Digester developers agree. There’s growing interest and enthusiasm for digesters, but also skepticism from dairy farmers weary of unmet promises. “I think our biggest real obstacle right now it that so many of these digester projects in the past have failed. There have been a lot of digesters built in the past that are no longer running,” says Doug Bryant of Maas Energy Works, a California company that helps develop, finance, and operate dairy digesters.

But the company argues that developers have learned valuable lessons and collected data on how to increase digester longevity and efficiency. Maas Energy Works has built 13 operational digesters with another 17 in various stages of development. “There’s been a lot of people throughout the last ten to 15 years who have come making promises about the money that [farmers will] make with digesters and never deliver on those promises,” Bryant explains. “We like to think our company is changing the way that’s perceived.”

Dairy Cows the Main Reason for California's Methane

Dairies are a major source of greenhouse gas emissions, accounting for roughly 60% of agricultural contributions of methane (CH4) and nitrous oxide (N20).

Dairy Sources

Other Sources of Methane

Move over the graphic to learn more. Click on a category to view sub-categories.

Source: California Air Resources Board

Promoters Hope to Overcome Past Experiences with Technical Support, Financing, and State Subsidies

One way Maas Energy Works changes the perception of dairy digester projects is by forging a working relationship with dairymen. In the past, developers have come in, constructed a digester, and then left. The farmers had to operate and maintain the device. As Bryant explains, “the dairyman in most cases is already running a million-dollar company and has their own huge business to manage. Trying to give them another business to manage doesn’t always work out well.” His company now allows dairy farmers to own the digesters, while operating and repairing the devices for them.

Now, a flurry of new anaerobic dairy digesters has popped up across California. More than 40 are functioning or in construction; most of them built in the last 18 months. At least another 40 projects are on the way. A big reason for the construction boom is state investment. With $99 million in greenhouse gas reduction money in hand, the California Department of Food and Agriculture plans to allocate between $61 and $75 million in grants to help finance dairy digester projects through the Dairy Digester Research and Management Program in 2018.

The program is essential to help farmers finance digester projects. The typical digester on a small dairy of 1,000 to 2,000 cows costs about $ 2 million, while larger farms can run up costs of more than $5 million. Greenhouse gas reduction credits will also help determine the affordability of digester projects. Ideally, these reward farmers for reducing methane emissions. But the instability of the markets is a limit on new projects. The value of government credits for reducing greenhouse-gas emissions fluctuates, making banks potentially hesitant to lend money to a project.

“If the payback doesn’t pencil out in five to six years or less, we don’t like to encourage guys to get into it, because that’s a long payback,” say Mass Energy’s Bryant. With the milk market struggling, farmers may be even more risk averse. With this in mind, the new law directs the government to develop new financial mechanisms. The aim: to solidify and add certainty to the projected value of carbon credits.

State Faces a Challenge: Deliver Concrete Benefits to Farmers

Success for these new digester projects will depend on farmers seeing benefit from the state’s environmental goals. As CARB’s Ryan McCarthy explains, “there’s still the early movers and some that are not necessarily as engaged as others but a lot of [dairy farmers] — as seen in the pickup in the number of projects — …hopefully see it as an opportunity.”

The law calls for various stakeholders to join a working group to create a sustainable market for energy produced from dairy digesters. “I think what SB1383 has done is created a forum to actually have conversations about how to promote [these projects],” says Fariya Ali of Pacific Gas and Electric. “I think that’s a positive thing to have a dedicated forum convened by the state agencies that allows energy companies and the developers and others to come together.”

Much of the conversation revolves around how to connect the energy produced from dairy digesters with the rest of the California energy system. There is also hope that transporting biomethane away from dairy farms in pipelines will improve air quality in the Central Valley.

Although the electricity and fuel generated from digesters is unlikely to radically change the energy market in California, it can offer significant economic benefits for individual farms. Under the state’s Low Carbon Fuel Standard program and Renewable Feed-In Tariff program, dairy farmers benefit from above market-rate credits. How? The economic gains from selling energy help pay for the cost of project installation, and also lower or eliminate a farm’s monthly electricity bill and offer a potential revenue stream.

Dairy digesters aren’t the law’s only focus. Although manure lagoons are a major source of methane, the state Department of Food and Agriculture is also helping pay for alternative strategies. This year, it plans to allocate between $19 million and $33 million to the state’s Alternative Manure Management Program. The law also established a working group looking at ways to remove volatile, methane-producing compounds from manure before it enters lagoons. These initiatives are less expensive than digesters and more familiar to dairy farmers.

The alternative management practices provide options for a diverse California dairy industry. “Not everything works on every dairy,” says Sousa. A dairyman “is going to pick from the menu and say this one works for me, this other one doesn’t.”

Researching Ways to Reduce Methane at its Source: Gassy Cows

A third major focus of SB1383 is the development of a research working group to fill gaps in industry knowledge. Least is known about fixing the problem of enteric fermentation- the technical name for methane produced during digestion and released in cow burps. In 2015 bovine gas made up almost 30 percent of state methane emissions in the agricultural sector.

There aren’t any proven cost-effective strategies to curb this. The research group is soliciting ideas about what to do. “That working group has been trying to be expansive about the way we look at reducing our methane problem rather than putting all our eggs in the manure management basket,” says Joan Salwen, founder of Elm Innovations, a group that intends to submit their idea about possibly feeding seaweed to cows to cut down on their gas.

Digesters, alternative manure management strategies, and research initiatives seem to suggest radical recent changes. But the dramatic shift in California’s dairy industry may have started earlier. In 2012, the industry made a nationwide commitment to reduce methane emissions 25 percent by 2020. In that sense, the rules set in SB1383 are not far off the industry’s trajectory. “It’s not completely out of touch with things we’ve been working on, but it is a challenge when we get a mandate to do something else that comes with a cost if it doesn’t come with additional revenue,” says Sousa.

What’s different now is that financial investment goes with the crackdown on dairy-farm methane. For now, at least, the revenue is coming in and the digesters are going up. Sousa says, “I think that’s been key to the response, from the initial response of ‘Oh, yet another thing we’ve got to deal with’ to, we’re making lots of headway toward meeting our goals with funding.”

The power gained by harnessing the Columbia River paved the way for industrial development and widespread farmland irrigation. But what if, instead of public utilities, that power had been sold by private firms seeking profits?

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